Owning a home is everyone’s dream. To some, it might come easy. But for others, you have to have a good credit score and do whatever it takes to pay off that mortgage, including using credit cards.

Whereas you might qualify for a mortgage even with a poor credit score, this also comes with a cost, such as getting bad interest.


There are several factors lenders consider before giving out loans, credit score being the most critical factor. It is, therefore, prudent to first improve your credit score before you think of applying for a mortgage. Let’s read on and find out more.

Reasons Why Mortgage Lenders Consider Credit Scores

This is what lenders base their decision on to gauge whether you will pay the debt or not. Having a high credit score means being reliable and disciplined to pay off debts, and vice versa. Mortgage lending is risky, and lenders want to ascertain whether the debt will be paid back before they approve your application.

Just like with any other business, lenders also want to make money and minimize losses. If you have a low credit score, this means your chances of paying back are 50/50. As a result, your application might either be denied or be given with a high-interest rate.

How to Check Whether Your Credit Score Is Good Enough to Buy a House

Well, it’s good to find out where you stand before you can go any further. FICO credit scores range from exceptional to good to poor. If the latter applies to you, you need to improve your credit score before you apply for a mortgage loan.

There are no standard criteria used to approve these loans. Each lender uses its own. On top of this, they also consider your income, debt-to-loan ratio, and income-to-loan ratio, among other things. Here is a breakdown of different FICO credit scores.

Exceptional Credit Score

If you have a credit score of 800 or above, then getting approved for a loan will be a walk in the park. However, this is subject to approval. Whereas most lenders consider exceptional credit scores, this does not guarantee a reasonable interest rate.

Considering the debt-to-income ratio, in most cases, a 43 percent ratio is what is needed to qualify for this mortgage loan. This will attract more lenders, giving you several mortgage options to select from.

Very Good Credit

If your credit score is between 740 and 749, then consider yourself to have excellent credit. This also means that you might get the mortgage loan coupled with a fair interest rate. Just like it is with people with exceptional credit, excellent credit is not good enough. There are other things lenders consider besides your FICO score.

Good Score

If your credit score is between 670 and 739, then you have a good score, and you qualify for a mortgage loan. However, this loan might not come with the best interest rate on the market. However, if you can afford to pay a larger down payment, then you will get a loan with a decent interest rate.

Fair Credit

Between 580 and 669 is considered a fair credit score. This also means that getting a loan might be a hard nut to crack. In this case, you should apply for an FHA loan, which is available for people with fair credit. However, you will be required to make a down payment of 3%, but if you have a score of less than 580, you will be required to make a down payment of at least 10%.

Poor Credit

Well, even with your poor credit, all hope is not lost, and this is thanks to FHA loans. There are also subprime mortgage lenders who still offer loans to people with poor credit. Since this is a high-risk venture, you will be charged a high-interest rate.


There are various implications that come with different credit scores, and each type of score will either qualify you to buy a home or limit you from buying one. Follow this guide to understand what the different scores might mean for you.